Coles price cuts

01.Lower grocery prices reflect stakes in supermarket competition

What is Coles doing?

Supermarket chain Coles says it will reduce selected products in its fruit and vegetable range by as much as fifty percent from today. It’s a marketing initiative that has caught the media’s attention and it follows discounting by both Coles and Woolworths in 2011 for staples such as milk, bread, toilet paper and laundry powders.

Media reports quote the vegetable grower representative body AusVeg as saying that even though there is a current oversupply of fruit and vegetables, it is concerned about longer term effects on farmers.

This move to cut prices follows last year's supermarket ‘price war’ between Coles and Woolworths that began with generic milk.

CHOICE’s position

We believe cheaper food and groceries are a fundamentally good thing for consumers, and we welcome increased competition in any sector where the benefits flow on to customers.

We also believe that consumers should look at the bigger picture of their grocery basket costs, as savings in one product category may be offset elsewhere. After all, supermarkets are businesses, not benevolent institutions.

Much of the debate around supermarket discounting is about whether we may see longer-term impacts that work against consumers’ interests. For example, in relation to restricted choice or increased control over pricing by a smaller number of players. Yet the very nature of these long-term impacts means they are difficult to forecast and measure, while the benefits of cheap products are immediate and clear.

It is also the case that CHOICE has long campaigned against the growing concentration in Australia’s supermarket sector (for more information see, Supermarkets). For example, Coles and Woolworths have been increasing their dominance of the market, from around 40 percent in 1975 to over 70 percent by 2011 (IBISWorld figures from September 2011).

It is because of concerns around this concentration, and its potential for anti-competitive impacts along supply chains, that CHOICE joined with the Australian Food and Grocery Council – not our regular allies on every issue - to propose the establishment of a supermarket ombudsman.

CHOICE accepts that some consumers won’t care if the big two supermarkets keep getting bigger, if private product labels become increasingly dominant and the duopoly extends into everything from pet insurance to pharmaceuticals.

The fact is however, many consumers tell us they do care; that they are concerned that two retail giants receive more and more of every dollar that we spend.

Learn more about CHOICE’s stance with Ingrid Just's 31 January 2011 interview on ABC News 24.

1 Dec 2011
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A new CHOICE survey suggests key improvements are needed to improve the legibility and prominence of unit pricing in Coles and Woolworths supermarkets to make it easier for consumers to compare the costs of everyday groceries.